What Is An Islamic Forex Account?
An Islamic, or ḥalāl forex trading account is a special type of swap-free trading account that has been created to adhere to religious Islamic beliefs that prohibit the accrual of interest.
Shariah, the Islamic law, prohibits interest payment and as such, Islamic traders cannot pay or receive interest rates.
An Islamic Forex account accounts must respect these Islamic principles:
- Payment or receipt of interest rates is prohibited
- Exchanges must be executed immediately
- Gambling is not allowed
Islamic forex accounts cannot incur or receive rollover swap points on positions that remain open at the New York close of 5 p.m. EST.
Islamic Account trades must be made with no delay, so currencies must be transferred from one account to another immediately, with transaction costs also paid at the same time.
Islamic accounts cannot be charged swap fees for holding positions overnight, but some brokers might apply administration charges if a position is left open after a specified amount of time. Each broker has its own terms and conditions for its Islamic accounts and might offer different spreads, fees, or make other changes.
Always check the terms and conditions for any account before making the decision to open one. Comparing a broker’s Islamic account versus their regular trading accounts can help you make sure that there isn’t a big difference with spreads or other trading conditions.
You have to find a broker that provides these types of accounts. While the exact procedures for opening an Islamic account differ from broker to broker, the basic steps that all brokers ask you to take to open an Islamic account are:
- Verify your account by sending relevant documentation.
- Fund your current trading account.
- Apply for an Islamic account. It’ll usually take 1-2 business days for your account to process.
- Start trading on your Islamic account
The Best Forex Brokers with Islamic Accounts
Forex Islamic accounts aren’t available with every forex broker, mostly because some brokers feel that they don’t make enough money through these accounts.
Some brokers might require you to sign up for these accounts by speaking with an agent first and it’s common for proof of religion to be requested before an Islamic account can be opened.
Below is a list of brokers offering Islamic forex accounts
The Islamic forex account types available on HFM are Micro, Premium, Auto and Zero Spread. The Islamic trading conditions replicate the ones of the trading account type but do not incur swap or rollover charges for holding positions overnight.Open Hotforex Islamic Account Here
XM offers an Islamic account option on all of its account types namely; Micro account, Standard account, XM Ultra-low account and Shares account. Click here to compare the different account types.Open XM Islamic Forex Account. here
Is it halal or haram for Muslims to trade forex online?
Trading Forex is Halal because trading is a business where an entrepreneur risks his investment with the expectation of making money later.
An Islamic Forex trading account makes forex trading halal because it removes the element of interest and allows the trader to use his skill to try and get money through the forex market.
Forex trading is not gambling and there are no loans in this business (no repayment with interest) so this business does not violate Islamic/Shariah religious laws.
What is a Swap In Forex Trading?
The event of leaving open positions on the foreign exchange market for more than 24 hours requires the payment of special fees, called SWAPs.
These fees are a kind of interest rate and, therefore, they are problematic for Muslim traders who follow Sharia Law, which prohibits certain financial transactions including those which include the accumulation of interest.
As a Swap can be seen as a type of interest, a fee for the service the broker is providing you, it creates a problem for Muslim traders following Sharia law.
Islamic forex accounts, therefore, help traders get around this challenge by removing swaps.
Conclusion on Islamic Forex Accounts
While Islamic/swap-free accounts can be beneficial to those that often leave positions open overnight, they are only meant for traders of the Islamic faith and you will have a hard time opening one without proof that this is your religion.
If you are Muslim, then the good news is that you do have options to trade without breaking any religious guidelines related to interest charges, gambling, and so on.
These account types have many similarities to traditional trading accounts, although the ways that fees are paid can differ so that the accounts are compliant with Muslim beliefs.
There are hundreds if not thousands of forex brokers on the web. Many of these brokers offer Islamic accounts but not all are the same. Some have hidden fees, limitations of swap-free account period, commissions, widening of spreads etc